By Poroma Pant
Under Armour Inc. stock surged 22 percent to $84.07 following sharply higher earnings and revenue that beat analysts’ expectations.
Net income increased 21 percent in the fourth quarter of 2015 to $106 million, or 48 cents per diluted share, from $88 million, or 40 cents per share, in the prior year’s period. Analysts estimated 46 cents.
Revenue increased 31 percent to $1.17 billion from $895 million, above analyst estimates of $1.12 billion.
Unsurprisingly, the company’s apparel line continued to record strong sales, up 22 percent to $865 million from $708 million. It was the 25th consecutive quarter of more than 20 percent sales growth in apparel, by far the company’s biggest product category.
Its biggest percentage growth, however, was in shoes, a 95 percent increase to $167 million from $86 million, primarily from “the success of the Curry signature basketball line and expanded running offerings”.
Golden Warriors star Stephen Curry has proven to be a gold mine for the company. “The sell-through on the Curry Two was like nothing we’d ever seen before, which is the same thing people say after they see Curry play,” said CEO Kevin Plank during the earnings call.
Following the release of the report, analysts continued to cheer from the frontlines. Mizuho Securities USA Inc. stated, “We reiterate our Buy rating on UA shares as a solid 4Q beat and forward guidance suggest the company continues to gain market share in the core apparel and footwear categories.”
Susan Anderson of FBR & Co. stated in her report, “We believe the 2016 revenue guide will once again prove conservative given the footwear opportunity (price realization/unit growth), international expansion opportunities, and elevated DTC execution. We continue to see revenue growth of ~30% over the next several years.”
While international sales account for the fastest growing segment, a 70 percent increase, gross margins fell to 48 percent from 49.9 percent, under pressure from unfavorable currency translation linked to the strong dollar.
Total debt jumped to $669 million compared with $284 million a year earlier, attributed to acquisition of Connected Fitness during the quarter. CEO Plank stated, “In Connected Fitness, we ended 2015 with nearly 160 million unique registered users across our platform that logged nearly 8 billion foods and 2 billion activities during the year.”
He elaborated that “earlier this month at the Consumer Electronics Show, we unveiled the new UA Record, the digital dashboard app for your health & fitness, and a suite of new products led by Under Armour HealthBox, the world’s first complete Connected Fitness system. Working seamlessly together, these products create the framework for all athletes to measure their health & fitness.”
Under Armour said it expects sales to grow to $4.95 billion in 2016, a growth of 25 percent. This year will mark Under Armour’s 20th anniversary.